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China's securities watchdog to boost regulations

Staff writer |
China's top securities regulator is determined to improve market mechanisms and fill the gaps in the regulation system dealing with irregular transactions, after the market chaos following Everbright Securities trading error.

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After it decided on a final punishment for the securities company, the China Securities Regulatory Commission is reconsidering current regulations, which need to be improved, the commission's spokesman said.

"We will launch official regulations soon to clarify the definition of 'irregular transaction', strengthen the management of the relevant transaction system, improve the pre-trading control system, establish a mechanism that can cancel mistaken deals, and launch an information disclosure system for irregular transactions," the spokesman said.

Analysts and market observers said that the current regulation system may not be able to prevent similar irregular transactions or ones caused by accidental technological flaws at a time when "creative" financial models - including high-frequency trading - are common practice among securities companies.

Hu Yuyue, director of the Research Institution of Securities and Futures at the Beijing Technology and Business University, said that despite the brokerage's trading system flaws, the stock exchange's whole transaction mechanism and the CSRC's regulatory system also bear some responsibility for the ensuing market chaos, writes China Daily.

"The current system allows securities companies to overdraw capital into investment accounts, which is the main reason why the huge orders were formed. That system should be stopped and we should build a risk isolation mechanism to prevent big mistakes," said Mr. Yuyue.